The Czech star is now set to enjoy a second crack of the whip at Premier League football, having struggled to make an impact in a spell with West Brom last season.
Vydra scored just 3 goals in 23 league games at the Hawthorns in the 2013-14 campain, before returning to the Hornets and helping them into the Premier League under Slavisa Jokanovic this year.
The 23-year-old scored 16 times in 42 appearances for Watford in the season just gone to help them into the top flight, and he will be hoping that he can make more of a success of his second attempt at Premier League football in what will be his third season at Vicarage Road.
He had previously been involved in Watford's playoff challenge in 2012-13, scoring 20 times that year as the club lost to Crystal Palace in the playoff final at Wembley.
The Observer also revealed that the player has been excused taking part in the Under-21 European Championships, after a request by Watford for him to miss the tournament in his home country.